Title Insurance 102

Last week, we took a look at what title insurance is and what it covers. This week, I wanted to discuss what doesn’t get covered under a title insurance policy.

When a title company performs a search, it reviews public records to find any potential red flags that might affect your purchase. Unfortunately, not every transaction or event that occurred during the lifespan of the property has been recorded, so it’s important to be familiar with the types of problems would not be addressed by your insurance.

To start, title insurance does not cover the condition of the home after the closing. For example, if you renovate your bathroom and discover mold behind the bathroom wall, remediation is not covered under title insurance. The same goes for termite colonies, mice in the walls, or underground oil tanks.

Moreover, not all mechanic’s liens are recorded and accessible to a title search. Something simple like the failure of a contractor to pay a subcontractor prior to the sale of the property can result in a mechanic’s lien that issues after closing. That lien becomes your problem to resolve.

If you are buying a foreclosed property, you must be especially careful. With foreclosures in particular, lenders do not always keep track of items such as mechanic’s liens or utility payments, so it will be incumbent upon the new owner to address any unpaid bills.

Note: if you are purchasing land and do not have a professional survey of the property prior to closing, that may lead to issues down the road; neighbors may have unintentionally encroached on your property over time, or vice versa. It’s always best to hire a surveyor to ensure that property lines haven’t shifted, because title insurance will not cover costs to correct that, either.

As always, it’s best to work with a real estate attorney to avoid these pitfalls in the future. Contact Us to discuss your title insurance and learn how we can help you avoid these pitfalls.